Question

Equivalent Units and Related Costs; Cost of Production Report; Entries

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

The balance in the account Work in Process—Filling was as follows on January 1:

Work in Process—Filling Department
(4,800 units, 40% completed):
	Direct materials (4,800 x $15.80)	$75,840
	Conversion (4,800 x 40% x $10.30)	19,776
		$95,616

The following costs were charged to Work in Process—Filling during January:

Direct materials transferred from Reaction
	Department: 61,900 units at $15.60 a unit	$965,640
Direct labor		332,710
Factory overhead		319,655

During January, 61,400 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 5,300 units, 50% completed.

Required:

1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the costs transferred from Filling to Finished Goods.

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.

4. The cost of production report may be used as the basis for allocating product costs between Work in Process  and Finished Goods . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigateg

Answer 1

Dover Chemical Company
Cost of Production Report-Filling Department
For the Month Ended January 31
Unit Information
Units charged to production:
Inventory in process, January 1			4800
Received from Reaction department			61900
Total units accounted for by the Filling Department			66700
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, January 1	4800	0	2880
Started and completed in January	56600	56600	56600
Transferred to Finished goods in January	61400	56600	59480
Inventory in process, January 31	5300	5300	2650
Total units to be assigned costs	66700	61900	62130
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Filling Department		965640	652365
Total equivalent units		61900	62130
Cost per equivalent unit		15.60	10.50
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, January 1			95616
Costs incurred in January			1618005
Total costs accounted for by the Filling Department			1713621
Cost allocated to completed and partially completed units:
Inventory in process, January 1 balance			95616
To complete inventory in process, January 1	0	30240	30240
Cost of completed January 1 work in process			125856
Started and completed in January	882960	594300	1477260
Transferred to Finished goods in January			1603116
Inventory in process, January 31	82680	27825	110505
Total costs assigned by the Filling Department			1713621
2
(1) Work in Process-Filling Department	965640
Work in Process-Reaction Department		965640
(2) Finished goods	1603116
Work in Process-Filling Department		1603116
3
	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Decrease	0.20	=15.8-15.6
Change in conversion cost per equivalent unit	Increase	0.20	=10.5-10.3
4
The cost of production report may be used as the basis for allocating product costs between Work in Process and Transferred-out. The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.